I’ve seen videos in the past from LFS owners when they went to China to purchase fish and saw the process first hand... And yes, they do use human style tattoo guns to create the designs....The tattooed ones, I believe they use normal human tattoo-guns. Someone can correct me if I'm wrong about the process, this is what I learned about it from word of mouth years ago.
You are also right that a lot of the stock dont make it, but more realistically around 50% - 60% dont make it...